Davies and Secretary, Department of Social Services (Social services second review)

[2020] AATA 3754

Davies and Secretary, Department of Social Services (Social services second review) [2020] AATA 3754 (24 September 2020)

Division:GENERAL DIVISION

File Number:2019/7427          

Re:Costanza DAVIES  

APPLICANT

AndSecretary, Department of Social Services

RESPONDENT

DECISION

Tribunal:Member G Hallwood

Date:24 September 2020

Place:Adelaide

The decision under review is affirmed

............[sgnd]............................................................

Member G Hallwood

CATCHWORDS

SOCIAL SECURITY – Age Pension – Overpayment debt – Right to recovery – Should debt be written off or waived – Decision under review is affirmed

LEGISLATION

Social Security Act 1991 (Cth)

Social Security (Administration) Act 1999 (Cth)

CASES

Beadle and Director-General Social Security (1984) 6 ALD 1

Gerhardt and Department of Employment, Education and Training [1996] AATA 173
Re David Norton Kirkman and Department of Social Security [1990] AATA 66; 20 ALD 400
Secretary, Department of Social Security v Hales [1998] FCA 219.

REASONS FOR DECISION

Member G Hallwood

24 September 2020

1. This application seeks to review a decision of the Social Services & Child Support Division of the Administrative Appeals Tribunal (AAT1) made on 14 October 2019 affirming the decision of an Authorised Review Officer (ARO) of Services Australia dated 29 July 2019 that Ms Costanza Davies was overpaid $7,586.99 Age Pension during the debt period 18 January 2017 to 9 June 2017, and that this overpayment was a recoverable debt to the Commonwealth  that should not be waived or written off.

   THE ISSUES

2. The Age Pension is the main income support payment for people that have reached the qualifying age. How much a person receives is dependent on whether they are single or a member of a couple, and what income they receive and assets they own.

3. Ms Davies was granted Age Pension from 23 April 2012.

4. On 20 June 2017 Ms Davies provided Services Australia with details of real estate assets worth $485,000 that had not previously been included in the calculation of Ms Davies Age Pension entitlement.

5. In light of this information Services Australia reassessed Ms Davies’ Age Pension entitlements finding that she had been overpaid $7,586.99 during the debt period. On 16 August 2017 Services Australia found that the overpayment was a debt owed to the Commonwealth and that there was no reason this debt should not be recovered.

6. The issues to be determined in this matter are:

   (a)Was Ms Davies overpaid $7,586.99 of Age Pension during the debt period?

   (b)If Ms Davies was overpaid, is the overpayment a debt to the Commonwealth?

   (c)If so, is there any basis not to recover any or all of the debt?

   BACKGROUND

7. The facts outlined below are based on documentary evidence and the oral testimony of Ms Davies. I believe the witness presented her evidence honestly, openly and to the best of her recollection.

8. Ms Davies moved in with her now ex-husband, Mr Craig Davies, in 1998 and married in late 2004.[1] They lived in a home, Mr Davies, together with his previous wife, now deceased, had built in Athelstone, South Australia.

   [1] A7, p9

9. Ms Davies told the Tribunal that during their marriage Mr Davies financially suppressed her to the extent that she was “living on coins every day”. Since 2005 the house at Athelstone was registered in the joint names of Ms and Mr Davies and a property in Magill which Mr Davies and his brother inherited was in Mr Davies and his brother’s names.

10. Ms Davies said that she became concerned that her own financial welfare and particularly that her children’s potential inheritance was at risk so she insisted on Mr Davies changing his will to reflect that she had greater ownership of the property should Mr Davies’ family contest the will. As a result of advice from their estate planning solicitor; Mr Davies reluctantly, according to Ms Davies, transferred the Athelstone property into Ms Davies’ name in April 2015.[2] On 16 September 2016 Ms Davies moved out of the Athelstone home, separating from Mr Davies.

    [2] A3, p9

11. On 24 November 2016 Ms Davies reported to Centrelink (now Services Australia) that she had separated from her husband and on 18 January 2017 Ms Davies advised Centrelink that she had moved out of the Athelstone home and that her new address was in Magill South Australia from 16 December 2016.

THE LEGISLATION

1. Relevant law is contained in the Social Security Act 1991 (the Act) and Social Security (Administration) Act 1999 (the Administration Act).

2. Section 55 of the Act relevantly provides that a person’s rate of Age Pension is worked out using Pension Rate Calculator A at the end of section 1064. Pension Rate Calculator A instructs that a person’s rate must take into account the assets test in Module G.

3. Module G of section 1064 of the Act sets out the effect of a person’s assets on their maximum rate of Age Pension and also sets an assets value limit which limit is indexed in accordance with Part 3.16 of the Act.

4. Subsection 11(1) of the Act states that ‘asset’ means property or money. This subsection also states that “exempt assets” means assets described in subsection 1118(1) of the Act.

5. Subsection 1118(1) of the Act relevantly requires that any right or interest of a person in their principal home is to be disregarded in the calculation of their assets.

6. Subsection 11(1) of the Act states that “principal home” has the meaning given by section 11A and subsection 11A(1) relevantly states that a reference to the principal home of a person includes a dwelling-house.

7. Subsection 11(4) of the Act explains who a ‘homeowner’ is in relation to the assets test.

8. It is a requirement under s68 of the Administration Act that a person receiving a social security payment must advise the Department of changes in their circumstances.

9. Section 72 goes on to specify that notification of changes of circumstances must be advised within 14 days.

10. Section 80 of the Administration Act requires the Secretary, when satisfied that a person is not qualified for a payment, to determine that the payment is cancelled or suspended.

11. Section 1223(1) of the Act sets out that when a social security recipient receives the benefits of a payment to which they were not entitled, they owe the amount overpaid as a debt to the Commonwealth.

12. Section 1236 of the Act enables a debt raised under social security legislation to be written off. Sub-section 1236 (1A) sets out that write-off may occur if:

    (a)The debt is irrecoverable at law; or

    (b)The debtor has no capacity to repay the debt; or

    (c)The debtor’s whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or

    (d)It is not cost effective for the Commonwealth to take action to recover the debt.

13. Section 1237 of the Act contains the power to waive the Commonwealth’s right to recover the whole or part of a debt under limited circumstances. Waivers create a permanent bar to recovery of the debt or part of the debt. It is relevant in this matter to consider s1237A Waiver of debt arising from error, and s1237AAD Waiver in special circumstances.

CONTENTIONS

Was Ms Davies overpaid $7,586.99 of Age Pension during the debt period?

1. In determining whether Ms Davies was overpaid during the debt period the Tribunal must be satisfied as to Ms Davies income and assets to be taken into account for the calculation of her Age Pension.

2. Section 55 of the Administration Act provides that the rate of an individual’s age care pension is determined by using the Pension Rate Calculator. This calculator is found at section 1064 of the Act in Module G which sets out the assets test. The assets test sets out the rate of payment for age pension which is calculated based on the worth of the assets a claimant owns. Subsection 11(1) of the Act stipulates that ‘asset’ is defined as being property or money.

3. From 1 January 2017, the maximum amount of asset value an individual could have to qualify for age pension, as set out by Module G, was $450,000. Every $1,000 over this limit in assets reduces the rate by $3 each fortnight until a cut-off limit of $742,500 is reached.[3]

   [3] SFCIS Annexure A, p4-7.

4. A Centrelink “Income Statement” addressed to Ms Davies and dated 18 January 2017 listed Ms Davies assets as:[4]

   [4] T13, pp174-175

Asset Type	Value	Date of Effect
Cash/Investments/Savings	$100,000	24 November 2016
Household and personal effects	$1,000	24 November 2016
Motor vehicle, boat and caravan	$2,000	24 November 2016
Managed investments	$189,157	20 September 2016
Shares	$42,630	20 September 2016

1. At the hearing Ms Davies contended that the Secretary had miscalculated the value of her assets.

2. Ms Davies stated that the Department’s calculation of her assets included a boat and a caravan which she did not own, as well as managed investments of $189,157 which she did not believe she owned. 

3. The Secretary stated that the Department had not included any amount for a boat or caravan in their calculations but had included $2,000 for her Toyota car – the “asset type” included cars, boats and caravans which may have caused the confusion. The Department also indicated that the $189,157 included in assets as managed investments was Ms Davies’ superannuation.  Once this was explained Ms Davies did not pursue her argument in relation to these assets. The Tribunal is satisfied that the value of the car and superannuation investments were correct at the time stated.

4. Ms Davies also stated that the $100,000 cash the Department said she held diminished over the debt period because she was using it to survive and pay legal bills.

5. In relation to the cash asset Ms Davies was unable to indicate how much, if any of the $100,000 she held in November 2016 was spent during the debt period. Ms Davies expressed a view that had she not been deprived of her Age Pension during the debt period she may have been able to achieve a better settlement payment when she and her now ex-husband divorced.

6. While it is possible that Ms Davies cash savings may have diminished during the debt period Ms Davies did not provide any evidence of this and was not able to indicate to the Tribunal by what amount. For this reason, the Tribunal cannot be satisfied that this asset was reduced by any material amount. For reasons made clear at paragraph 46 below, Ms Davies would have needed to spend $73,537 of the $100,000 in the five months of the debt period before the amount was material to whether she was entitled to any Age Pension.

7. Prior to, and during the debt period the Tribunal is satisfied that Ms Davies assets excluding her principal place of residence were $334,787 and that this was the basis on which the Department calculated her entitlement to Age Pension.

8. Ms Davies, in a “Real Estate Details Form” (MOD R) dated 20 June 2017, estimated the value of her Athelstone property as $485,000.

9. It is not disputed that Ms Davies had separated from her husband on 26 November 2016 and nor is there any dispute that she vacated the family home on 18 January 2017.

10. The Secretary contends that the value of the Athelstone property, that until 17 January 2017 had been Ms Davies principal home and excluded from her assets calculation by reason of 1118(1) of the Act, was required to be assessed as an asset from 18 January 2017 because it was no longer her primary home.

11. Ms Davies stated that the house at Athelstone should not be counted as an asset because she was unable to use it during the debt period, and her husband had taken out a caveat over the property on 12 December 2016, so she was unable to sell it. 

12. During the debt period of 18 January 2017 to 9 June 2017 the Secretary contends that Ms Davies was the sole owner of the Athelstone property and had been since April 2015.

13. In evidence is a letter dated 17 June 2015 from Vicki R Reid, registered conveyancer, to Ms Davies noting that the certificate of title for the Athelstone property had been transferred and that the sole proprietor was Ms Davies.[5] The letter is accompanied with the relevant certificate of title confirming Ms Davies’ sole ownership of the property.[6]

    [5] T9, p87

    [6] T9, pp88-89

14. Also in evidence is a “Real Estate Details Form” (MOD R) dated 20 June 2017 and signed by Ms Davies identifying at question 27 that she owned 100% of the Athelstone property.

15. Subsection 1121(1) of the Act provides that a charge or encumbrance over an asset, for the purposes of calculating their value, reduces the value of the asset by the value of the charge or encumbrance.

16. In relation to the caveat, the Secretary contends that a caveat over the house does not amount to a charge or an encumbrance and therefore the value of the asset cannot be reduced for the purposes of the assets test solely because of the existence of a caveat.

17. The Secretary cited Deputy President Forgie in Re David Norton Kirkman and Department of Social Security (1990) 20 ALD 400, in similar circumstances of a caveat being lodged against property pending resolution of family law proceedings under the former Social Security Act 1947, starting from [19]:

    (19)This then is the essential difference between a charge or an encumbrance and a caveat. A caveat is simply a protective device allowing the caveator an opportunity to take other action to establish his interest. It does not of itself create a "right to payment" … in the sense of a charge or a claim or demand in the sense of an encumbrance … but merely holds the status quo as it were while the caveator takes, expeditiously, other steps to protect his interests.

    (20)Understandably, Mr Kirkman feels that his hands are tied and that he cannot dispose of his house and his unit while the caveats exist and the property settlement in the matrimonial proceedings between himself and his wife remains unresolved. Whether or not he would be able to have these caveats lifted is a matter that is outside the scope of these proceedings.

    (21)I am satisfied that the caveats are not a charge or encumbrance within the meaning of s 4(1}(b} and, therefore, that the value of the house and the unit cannot be reduced by virtue of them.

18. For these reasons the Tribunal is satisfied that the caveat does not affect the value of the Athelstone property for the purposes of the assets test. The Tribunal finds that from 18 January 2017 Ms Davies’ assessable assets increased by $485,000 to $819,787 which was well in excess of the cut-off limit from Module G of $742,500 until 19 March 2017 and $746,250 from 20 March 2017.

19. Ms Davies had been paid $7,876.93 in Age Pension during the debt period of 18 January 2017 to 9 June 2017 and because her assets exceeded the cut-off limit for the whole of this period the Tribunal finds that Ms Davies was overpaid $7,586.99 of Age Pension during the debt period.

If Miss Davies received an overpayment, is that overpayment a debt due to the Commonwealth?

1. Subsection 1223(1) of the Act sets out what is to occur in the case of an overpayment:

   (1)Subject to this section, if:

   a)    a social security payment is made; and

   b)    a person who obtains the benefit of the payment was not entitled for any reason to obtain that benefit;

   the amount of the payment is a debt due to the Commonwealth by the person and the debt is taken to arise when the person obtains the benefit of the payment.

2. It has been established that during the specified debt period Ms Davies was paid $7,586.99 in Age Pension. This money was deposited into Ms Davies bank account for her benefit. It has also been established that Ms Davies was not entitled to Age Pension during the debt period.

3. For these reasons the Tribunal finds that the amount of $7,586.99 Age Pension paid to Ms Davies in relation to the period from 18 January 2017 to 9 June 2017 is a debt due to the Commonwealth.

If Miss Davies owes a debt to the Commonwealth, is there any basis not to recover any or all of the debt?

1. In certain limited circumstances debts raised and owed to the Commonwealth may be written off or waived.

Write-off

1. Section 1236(1A) of the Act provides for discretion to write-off debts in some limited circumstances:

   The Secretary may decide to write off a Debt under subsection (1) if, and only if:

   (a)The debt is irrecoverable at law; or

   (b)     The debtor has no capacity to repay the debt; or

   (c)      The debtor’s whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or

   (d)     It is not cost effective for the Commonwealth to take action to recover the debt.

2. The meaning “irrecoverable by law” is set out in subsection 1236(1B) of the Act. The is no information before the Tribunal that suggests the debt is irrecoverable at law.

3. A debtor’s capacity to repay the debt is determined in accordance with subsection 1236(1C) of the Act and a debtor is presumed to be able to repay the debt if it is able to be recovered using one of the methods listed in the relevant subsection unless such recovery would cause the debtor severe financial hardship. In this case Ms Davies has already repaid the debt in its entirety and for this reason the Tribunal is satisfied that Ms Davies had the capacity to repay the debt. For the same reason it is clear that Ms Davies whereabouts were known, and it was cost effective for the Commonwealth to recover the debt.

4. French J stated in Secretary, Department of Social Security v Hales [1998] FCA 219 that “the taxpayer is entitled to expect that in the ordinary course money paid to people which they are not entitled to receive will be recovered.”

   The Tribunal is satisfied that Ms Davies circumstances do not fit any of those under which a write off is permitted under subsection 1236(1A). For these reasons the Tribunal finds that there is no basis to write off any or all of the debt.

Waiver

1. The Act provides for some circumstances in which debts may or must be waived. The two mechanisms that are relevant to issues raised by this matter are:

   (a)Waiver of a debt solely attributable to an error of the Department (s1237A); and

   (b)Waiver of a debt in special circumstances (s1237AAD).

   Waiver of a debt solely attributable to an error of the Department

2. In Gerhardt and Department of Employment, Education and Training [1996] AATA 173, Deputy President Forgie finds the meaning of the word “solely” to mean “exclusively,” “only” and “to the exclusion of all else” and therefore does not extend to external influences causing the error.

3. The note to subsection 1237(1) sets out that waiver is not allowed where a part of a debt was caused by administrative error and partly by one or more factors such as error by the debtor.

4. The Secretary contends that a number of notices were issued to Ms Davies under subsection 68(2) of the Act including on 10 September 2016,[7] 24 November 2016,[8] 3 December 2016,[9] and 18 January 2016.[10] These notices required Ms Davies to tell the Department of any change in her assessable assets of $1,000 or more. It was not until 18 January that Ms Davies informed Centrelink that she had left her home in Athelstone and was in rental accommodation.[11]

   [7] T13, p161

   [8] T13, p166

   [9] T13, p168

   [10] T13, p176

   [11] T12, p142

5. It is not contested that Ms Davies was provided with a MOD R form in order to identify the value of her real estate assets, and her new address was recorded on 18 January 2016.  Ms Davies did not return the MOD R Form to Centrelink until 20 June 2017 and it was this form that identified the value of Ms Davies’ Athelstone house.[12]

   [12] T12, p142

6. The Tribunal is satisfied that the debt Ms Davies accumulated was not solely as a result of error of the Department and was because Ms Davies failed to inform the Department of the assets that were no longer exempt by way of being her principal home.

7. As the error resulted from Ms Davie’s failure to report and not the Department then it cannot be said to be an error “solely” by the Department. The Department only paid her incorrectly because they had not received the correct information from the claimant. This error occurred because Ms Davies did not meet her legal obligations to notify the department of her change in circumstances being that she is the sole proprietor of the Athelstone property and when she was no longer residing at her house of ownership then it became an assessable asset. The Tribunal finds that in accordance with subsection 68(2) of the Administration Act the Department did not make an error.

   Waiver of a debt in special circumstances

1. Section 1237AAD sets out criteria for a waiver as a result of special circumstances:

   The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:

   (a)the debt did not result wholly or partly from the debtor or another person knowingly:

   (i)making a false statement or a false representation; or

   (ii)failing or omitting to comply with a provision of this Act, the Administration Act or the 1947 Act; and

   (b)there are special circumstances (other than financial hardship alone) that make it desirable to waive; and

   (c)it is more appropriate to waive than to write off the debt or part of the debt.

2. Before considering whether Ms Davies’ stated special circumstances are adequate to enliven the waiver provision in s1237AAD, the Tribunal must be satisfied relevantly that the debt did not result wholly or partly from the debtor knowingly making a false statement or representation or failing or omitting to comply with a provision of the Act, or the Administration Act. In this matter the Secretary did not contend that Ms Davies knowingly failed to comply with a provision of the Act and the Tribunal is satisfied that she succeeds in relation to paragraph (a).

3. In relation to paragraph (b) Ms Davies indicated that she was suffering from economic and emotional bullying by her ex-partner and she was undergoing a divorce. She stated that she only ever received pennies from her husband. These circumstances, while unfortunate, are not unusual, uncommon or exceptional[13]. She also expressed financial issues which is why she had saved up the amount of $100,000 in her bank to support herself whilst undergoing divorce. In evidence Ms Davies described making her husband change his will so that she could protect her children’s interest and their joint assets. Ms Davies went further and had him change his interest in the Athelstone property putting it 100% in her name.

   [13] Beadle and Director-General of Social Security (1984) 6 ALD 1

4. The Tribunal accepts that Ms Davies she has been subject to a degree of economic bullying although Ms Davies acknowledged that she did manage to save $100,000 so that she could leave him. Ms Davies also gave evidence that she managed to “force him [Mr Davies]” to transfer 100% of his family home into her name, a home that Ms Davies told the Tribunal Mr Davies was very emotionally attached to.

5. Ms Davies informed the Tribunal that she has experienced anxiety resulting from the difficulties of the breakdown of her marriage. She had regularly attended psychological treatment under a mental health care plan.[14]

   [14] A8 p11.

6. The Tribunal acknowledges the emotional and psychological difficulties Ms Davies faced during her separation and divorce. These difficulties are not something that the Tribunal finds to be unusual, uncommon or exceptional in these circumstances.  

7. Having explored the issues raised by Ms Davies during the hearing, the Tribunal is not satisfied that special circumstances exist that make it desirable to waive the debt in this matter.

8. For these reasons the Tribunal finds that there is no reason to write off or waive Ms Davies debt to the Commonwealth.

CONCLUSION

1. The Tribunal finds that Ms Davies did not qualify for the age pension at any time during the debt period.

2. As Ms Davies did not qualify for age pension and she received a payment $7,586.99 in excess of her entitlement, the Tribunal finds that a debt of this amount was correctly raised to the Commonwealth.

3. The Tribunal also finds that there is no basis to write off or waive the debt raised.

DECISION

1. For the above reasons the Tribunal affirms the decision under review.

I certify that the preceding 74 (seventy-four) paragraphs are a true copy of the reasons for the decision herein of Member G Hallwood

..................[sgnd]............................................

Administrative Assistant Legal

Dated: 24.09.2020

Date of hearing:	21.08.2020
Applicant:	Costanza Davies, self represented
Solicitors for the Respondent:	Ms Julie Edwards. Department of Social Services